Strong growth in first half-year results

  • Organic sales growth of cable businesses*: +12.9%
  • Operating margin: +73%
  • Net debt reduced by 100 million euros

 

Paris, July 25, 2007 - The Board of Directors of Nexans chaired by Gérard Hauser, met on July 24, 2007 and reviewed the Group's consolidated financial statements for the 2007 first half-year.

  • First half-year sales reached 3,792 million euros compared to 3,686 million euros at June 30, 2006.
    At constant non-ferrous metal prices**, sales reached 2,451 million euros compared to 2,273 million euros in the first half of 2006. The organic growth of the cable businesses was 12.9% (4.6% including the electrical wires business).
  • The operating margin totaled 187 million euros over the period, compared to 108 million euros in the first half of 2006, an increase of 73%. Operating margin as a percentage of sales has increased from first half 2006 to first half 2007 from 4.8% to 7.6% at constant non-ferrous metal prices.
  • Net income (Group share) for the first half of the year totaled 119 million euros, compared to 211 million euros at June 30, 2006. In the first half of 2006, net income included a capital gain of 149 million euros from the sale of distribution activities in Switzerland.
  • Net financial debt totaled 533 million euros at June 30, 2007,
    100 million euros lower than at December 31, 2006, reflecting a 141% increase in cash flow and good control of the working capital in an environment of strong growth.

*  Cable businesses and associated products (accessories), excluding electrical wires.
** To neutralize the effect of variations in the purchase price of non-ferrous metals and thus measure the underlying sales trend, Nexans also calculates its sales using a constant price for copper and aluminium
(see note 1 h. in the appendix to the 2006 financial statements, in the 2006 Annual Report).


Strategic priorities confirmed by excellent first half-year results

Commenting on the first half-year results, Gérard Hauser, Nexans’ Chairman and CEO, said: "The excellent results achieved by the Group in the first half of 2007 demonstrate the validity of the direction set by the Strategic Plan presented in January. The focus on energy infrastructures, industry priority markets such as transport and oil and gas businesses, and the withdrawal from upstream sectors, is orienting the Group to businesses with longer economic cycles. Growth is being achieved alongside an improvement in the balance sheet.

These characteristics, together with an ambitious investment program and an ongoing culture of operational improvement constitute the Group’s specific strengths. They will enable us to continue applying our policy of strong and profitable growth in the second half (1).. In view of these factors, we expect to achieve annual double-digit sales growth in our cable businesses, with second-half operating margin as a percentage of sales higher than in the first half. Furthermore, we are continuing to pursue our target of reducing debt, at a constant consolidation scope and at constant copper prices, compared with December 31, 2006."

 (1) This outlook, at constant metal prices, is based on the assumption that the worldwide economic context will remain favorable and comparable with that of the first half-year.

 

Detailed analysis of business results

Key figures - First-half 2007

(in millions of euros)

At constant
non-ferrous metal prices

 

HY 2006

HY 2007

Sales

Sales at constant exchange rates

Operating margin (% of sales)

Net income (Group share)

 2,273

2,223

4.8%

211(2)

 2,451

2,451

7.6%

119

(2) Including the capital gain from the sale of the Swiss distribution activities amounting to 149 million euros.

 

Sales and operating margin by business sector (*)

(in millions of euros)

HY 2006

HY 2007

% change

Sales
at constant metal prices and exchange rates

Energy
Telecom
Other
Sub-total: Cable businesses

Electrical wires

2,223



1,546
239
5
1,790

433

 2,451



1,883

276
5
2,164

287

+10.3%



+21.8%
+15.5%
-
+20.9%

-33.7%

       
Operating margin

Energy
Telecom
Other
Sub-total: Cable businesses

Electrical wires

108

99
13
(6)
106

2

187

160
27
(4)
183

4

+73.1%

+61.6%
+107.7%
-
+72.6%

+100%

       

Operating margin as % of sales 

Energy
Telecom
Other
Sub-total: Cable businesses

Electrical wires

4.8%

6.4%
5.4%
n/s
5.9%

0.4%

7.6%

8.5%
9.9%
n/s
8.4%

1.4%

 
(*) In accordance with the new segmentation set out in the Strategic Plan, submarine cables used to control submarine vehicles and robots, and electronic cables, have been included in the energy infrastructure and industry segments respectively.
The following comments are based on the new segmentation.
  • Energy

Sales in the Energy business totaled 1,883 million euros in the first half of 2007, reflecting 12.6% organic growth. The main consolidation scope effect resulted from the integration of Olex, whose first half-year sales totaled 139 million euros at constant non-ferrous metal prices.

Operating margin increased by 61.6%, rising from 99 million euros in the same period last year to 160 million euros at June 30, 2007.

Energy infrastructures: strong growth in high voltage cables

Energy infrastructure cable sales totaled 784 million euros, reflecting organic growth of more than 6.5% compared with the first half of 2006. Demand was particularly high in the energy accessories and high voltage cables segments. Alongside the strong sales growth, there has also been a clear improvement in profitability. Backlog in high voltage cables (970 million euros) represents 18 months of activity.

Industry: strong growth in sales of special cables

With an organic increase of 21%, sales of special cables, to major industrial manufacturers, totaled 510 million euros in the first half of 2007. The Group's development is accelerating in high value-added sectors defined as priorities in the 2007-2009 Strategic Plan (shipbuilding, railways, oil and gas, etc.).

Building: exceptional profitability

Sales of cables for building markets totaled 589 million euros at constant non-ferrous metal prices, representing 14.5% organic growth compared to the first half of 2006. In Europe, market conditions resulted in strong earnings growth. In North America, following a slowdown in the second half of 2006, organic growth in sales amounted to 4.4% in the first half of 2007.

  • Telecom

The sales of the Telecom activity totaled 276 million euros at constant non-ferrous metal prices, representing organic growth of 15.5% compared to the first half of 2006.

Over the same period, operating margin doubled, rising from 13 million to 27 million euros.

Telecom infrastructures: accelerating sales of high capacity telecom cables

Organic growth in sales of telecom infrastructure cables amounted to 13.5% in the first half of 2007. Sales totaled 129 million euros compared with 114 million euros at June 30, 2006. This good performance reflects accelerating sales of optical fiber cables and an increase in copper cable sales, driven by investments in telecommunications infrastructure.

Local area networks (LAN): product offering moving upmarket

Organic growth in sales of local area network cables amounted to 17.3%, confirming the trend observed since the end of 2006. Sales of LAN cables totaled 147 million euros compared to 125 million euros at June 30, 2006. Sales were boosted by the development of private infrastructure projects such as airports. Nexans is now concentrating on the supply of high capacity cables and cabling systems.

 

  • Electrical Wires

The sales of the Electrical Wires businesses totaled 287 million euros in the first half of 2007, compared with 433 million euros at June 30, 2006, reflecting a reduction of approximately 33% in line with the Group's policy of refocusing only on its internal requirements.

The sale of the remaining winding wires businesses is in the process of finalization.

Operating margin increased from 2 million to 4 million euros.

 

Analysis of sales and operating margin by geographical areas, excluding electrical wires

(in millions of euros)

HY 2006

HY 2007

  Sales (1)

OM

OM/sales

Sales (1)

OM

OM/sales

Europe

1,315

59

4.5%

1,476

108

7.4%

North America

214

32

15%

217

41

19.2%

Asia-Pacific

113

5

4.4%

287

23

7.9%

Rest of the World

148

10

6.8%

184

11

6.3%

Sub-total:
Cable businesses

1,790

106

5.9%

2,164

183

8.4%

 (1) Sales at constant metal prices and exchange rates

  • Europe: clear increase in profitability

Sales in Europe in the first half of 2007 totaled 1,476 million euros, compared to 1,315 million euros in the first half of 2006, representing organic growth of 13.5%.

Operating margin in Europe amounted to 108 million euros in the first half of 2007, compared with 59 million euros in 2006, representing an increase of 83%.

Nexans benefits from a generally favorable economic environment, and is reinforcing its presence in all sectors, particularly in industrial cables (+18.4%) for the oil and gas industry, handling and shipbuilding markets.

 

  • North America: strong activity in the industry and telecom network markets

Sales totaled 217 million euros in the first half of 2007 compared with 214 million euros at constant exchange rates in the same period of 2006.

Despite the unfavorable impact of the temporary closure of a production site in Canada for the first 5 months of 2007, demand for medium voltage cables for energy infrastructures continues to be strong as the upgrading of the distribution network continues, both in Canada and the United States. At the same time, sales of electronic cables (aerospace and shipbuilding) grew by 17%. In the telecom network segment, sales of LAN cables grew by 15.8%.

Operating margin increased from 32 million euros at June 30, 2006 to 41 million euros in the first half of 2007.

 

  • Asia-Pacific: steady organic growth in sales and contribution of Olex

Asia-Pacific sales totaled 287 million euros in the first half of 2007 compared with 113 million euros in the same period last year. Much of this increase is attributable to the acquisition of Olex, included for the first time in the first half year consolidation. Organic growth in the area also remained high at 13.2%.

Operating margin in the area totaled 23 million euros in the first half of 2007, compared with 5 million euros at June 30, 2006. Operating margin as a percentage of sales, at constant scope and exchange rates, rose from 5.7% in the first half of 2006 to 7.9% in the first half of 2007. This growth particularly reflects the extension of the Group's industrial capacities in China, and the improved performance in Vietnam.


  • Rest of the World: strong growth in Mediterranean basin

Sales totaled 184 million euros in the first half of 2007, compared with 148 million euros at June 30, 2006, representing organic growth of more than 24%. Sales growth was particularly high in Turkey, Lebanon and Brazil.

Operating margin amounted to 11 million euros in the first half of 2007, compared with 10 million euros at June 30, 2006.

 

Capital increase reserved for Nexans employees

Nexans announces the launch of a capital increase reserved for Group employees through a group employee share savings plan, with the issue of a maximum of 500,000 new shares. This will be the third international employee share offer carried out by the Group. Two subscription formulas will be offered through the company sponsored mutual funds (subject to compliance with local regulation): a conventional formula enabling employees to subscribe to Nexans shares at a price discounted by 20% compared to the reference market price, and a structured formula offering a leverage effect, which provides a guarantee for the amount invested by the employees.
Nexans' aim is to strengthen the employee links with the Group, both inside and outside France, by the association through the plan with the Group's future developments and results.
The precise conditions of the offer, called "Act 2007," which should be carried out by the end of the year, will be communicated to employees at a later date, and a second news release will be issued on this subject.


Financial calendar

  • September 24, 2007: Individual shareholder information meeting in Versailles*
  • October 18, 2007: Publication of 2007 third quarter sales
  • November 13, 2007: Individual shareholder information meeting in Strasbourg*
  • November 19, 2007: Individual shareholder meeting in Bordeaux*
    January 31, 2008: Publication of 2007 annual consolidated results
    (* dates may be subject to change)

A full set of slides presenting the results, including the results by business, is available on the following link www.nexans.com/finance/financialpresentations. A detailed presentation of the financial statements, the first half-year sales report and the full text of the first half-year financial report will be available from July 27 on the Nexans Internet site at www.nexans.com

Appendices
  1. Consolidated income statement
  2. Consolidated balance sheet
  3. Consolidated statement of cash flows
  4. Information by business sector

Consolidated income statement

 


in millions of euros

1st Half-year 2007

1st Half-year 2006 restated **

1st Half-year 2006
reported

Net sales

3 792

3 686

3 686

Metal price effect *

(1 341)

(1 413)

(1 413)

Net sales at constant metal prices *

2 451

2 273

2 273

Cost of sales

(3 369)

(3 364)

(3 364)

Cost of sales at constant metal prices *

(2 028)

(1 951)

(1 951)

Gross profit

423

322

322

Administrative and selling expenses

(207)

(186)

(186)

R&D costs

(29)

(28)

(28)

Operating margin *

187

108

108

Core exposure effect ***

48

160

 

Net asset impairment

(11)

(124)

 

Change in fair value of non ferrous metal derivatives

(5)

49

49

Gains or losses on asset disposals

4

148

148

Restructuring costs

(12)

(36)

(36)

Operating Income

210

306

269

Cost of debt (gross)

(26)

(25)

(25)

Income from cash and cash equivalents

6

8

8

Other financial expenses

(17)

(21)

(21)

Share in net income of associates

 

1

1

Income before taxes

173

269

233

Income taxes

(49)

(30)

(15)

Net income from continuing operations

124

239

218

Net income / (loss) from discontinued operations

0

(3)

(3)

Consolidated net income

124

236

215

Attributable to equity holders of the Company

119

232

211

Attributable to minority interests

5

4

4

       

Net income from continuing operations per share (in euros)

     

- Basic earnings per share

4,67

10,76

9,78

- Diluted earnings per share

4,16

9,18

8,35

Net income / (loss)  from discontinued operations per share (in euros)

     

- Basic earnings / (loss) per share

 

(0,12)

(0,12)

- Diluted earnings / (loss) per share

 

(0,10)

(0,10)

Net income per share attributable to equity holders of the company (in euros)

     

- Basic earnings per share

4,67

10,64

9,66

- Diluted earnings per share

4,16

9,08

8,25

* Business management indicator held to measure the Group's operational performance
** From December 31, 2006 the Group financial statements were prepared following a change relating to the recognition of non-ferrous metal inventories (see note 1.c). The impact of the change is shown in the restated column for 2006 1st Half.
*** Effect relating to the revaluation of the core exposure at the weighted average unit cost


 

Consolidated balance-sheet

in millions of euros

June 30, 2007

December 31, 2006

ASSETS

 

 

Goodwill

285

253

Intangible assets

14

16

Property, plant and equipment

846

815

Investments in associates

-

22

Other non current financial assets

26

50

Deferred tax assets

64

100

Other non-current assets

-

-

NON-CURRENT ASSETS

1 234

1 256

Inventories and work in progress

1 417

1 328

Amounts due from customers on construction contracts

103

77

Trade receivables

1 374

1 272

Current tax receivables

90

86

Other current financial assets

167

105

Cash and cash equivalents

354

287

Assets and group of assets held for sale

42

60

CURRENT ASSETS

3 547

3 214

TOTAL ASSETS

4 781

4 470

EQUITY & LIABILITIES

   

Capital stock

26

25

Additional paid-in capital

1 132

1 127

Treasury stock

-

-

Reserves

420

158

Net income attributable to equity holders of the Company

119

241

Equity excluding minority interests

1 696

1 551

Minority interests

42

39

TOTAL EQUITY

1 738

1 589

Pension and other post-employment benefit obligations

330

336

Long-term provisions

34

36

Convertible bonds

253

247

Other long-term financial debt

350

7

Deferred tax liabilities

54

67

Other non-current payables

-

-

NON-CURRENT LIABILITIES

1 021

693

Short-term provisions

95

97

Short-term financial debt

285

665

Customers' deposits and advances

44

39

Amounts due to customers on construction contracts

124

71

Trade payables

1 067

917

Current tax payables

90

86

Other current financial liabilities

305

290

Liabilities related to group of assets held for sale

11

22

CURRENT LIABILITIES

2 022

2 187

TOTAL EQUITY AND LIABILITIES

4 781

4 470

 
 

Consolidated statement of cash flows

in millions of euros

1st Half-year 2007

1st Half-year 2006 restated **

1st Half-year 2006 reported

Net income attributable to equity holders of the Company

119

232

211

Minority interests

5

4

4

Depreciation, amortization and impairment of assets

63

171

47

Cost of Debt

26

16

16

Core exposure impact *

(48)

(160)

-

Other restatements ***

69

(150)

(165)

Cash flow from operations before interests and taxes ****

235

113

113

Decrease (increase) in receivables

(148)

(346)

(346)

Decrease (increase) in inventories

(43)

(191)

(191)

Increase (decrease) in payables and accrued expenses

206

196

196

Other assets and liabilities

-

3

3

Income tax paid

(40)

(37)

(37)

Depreciation of current assets and accrued contract costs

(5)

(3)

(3)

Net change in current assets and liabilities

(30)

(379)

(379)

Net cash generated from / (used in) operating activities

205

(265)

(265)

Proceeds from disposals of property, plant and equipment and intangible assets

4

3

3

Capital expenditures

(69)

(62)

(62)

Decrease (increase) in loans granted

8

(8)

(8)

Purchase of consolidated entities, net of cash acquired

(29)

(19)

(19)

Proceeds from sale of consolidated entities, net of cash transferred

48

184

184

Net cash used in investing activities

(38)

99

99

Net change in cash and cash equivalents after investing activities

166

(167)

(167)

Proceeds from / (repayment of) long-term borrowings

350

-

-

Proceeds from / (repayment of) short-term borrowings

(388)

232

232

Proceeds from issuance of shares paid up in cash

6

7

7

Interest paid

(26)

(16)

(16)

Dividends paid

(32)

(23)

(23)

Net cash generated from financing activities

(91)

200

200

Net effect of currency translation differences

(10)

1

1

Impact of change in scope of discontinued operations

0

3

3

Net increase (decrease) in cash and cash equivalents

66

37

37

Cash and cash equivalents at beginning of year

288

117

117

Cash and cash equivalents at year-end

354

154

154

* Impact relating to the revaluation of the core exposure at the weighted average unit cost – no cash impact (see Note 1.c)
** From December 31, 2006 the Group financial statements were prepared following a change relating to the recognition of non-ferrous metal inventories (see note 1.c). The impact of the change is shown in the restated column for 2006 1st Half.
*** 1st Half-year 2006 restated :Including the capital gains on the disposal of Electro-Matériel (- 149 million euros), offsetting of the tax charge (+ 37 million euros), non-cash impact of the change in fair value of derivatives (-54 million euros). 1st Half-year 2007:Including offsetting of the tax charge (+ 40 million euros), non-cash impact of the change in fair value of derivatives (+24 million euros)
**** The Group also uses the "operating cash flow" concept which is calculated after adding back in restructuring costs (9 million euros in H1 2007 and 14 million euros in H1 2006), and deducting interest and tax paid.

 

Information by business segment


in millions of euros

Electrical wires

Energy**

Telecom

Others
(or non-allocated
)

Eliminations inter-segment *

Total Group

June 30, 2007

           

Net sales at current metal prices

1 437

2 598

334

5

(582)

3 792

Net sales at constant metal prices

470

1 883

276

5

(182)

2 451

Operating margin

4

160

27

(4)

 

187

June 30, 2006

           

Net sales at current metal prices

1 763

2 056

381

4

(518)

3 686

Net sales at constant metal prices

631

1 491

327

4

(180)

2 273

Net sales at constant metal prices and 2007 exchange rates

612

1 467

319

4

(179)

2 223

Operating margin

2

97

15

(6)

 

108

 

* Inter-segment eliminations mostly stem from the upstream Electrical Wires business
** Following the segmentation of the Group 2007-2009 Strategic Plan, two businesses (Electronic & Data Communication cables & Remote 
Operating vehicles underwater cables) were reclassified from January 1st 2007 from the Telecom segment to the Energy segment. 2006 H1 figures have not been restated in the above table. These businesses were representing a turnover of 111 millions of euros on H1 2007 and 81 millions of euros on H1 2006.

 

Information by geographical area

in millions of euros

France

Germany

Other Europe

North America

Asia-
Pacific

Rest of the world

Total Group

June 30, 2007

             

Net sales at current metal prices (before inter-segment eliminations)

1 485

459

1 187

736

444

289

4 600

Inter-segment sales at current metal prices

(538)

(44)

(206)

 

(5)

(15)

(808)

Net sales at current metal prices

947

415

981

736

439

274

3  792

Net sales at constant metal prices

559

299

757

357

295

184

2 451

Operating margin

32

26

52

42

24

11

187

June 30, 2006

             

Net sales at current metal prices (before inter-segment eliminations)

1 529

419

1 071

938

190

233

4 380

Inter-segment sales at current metal prices

(470)

(24)

(173)

-

(1)

(26)

(694)

Net sales at current metal prices

1 059

395

898

938

189

207

3 686

Net sales at constant metal prices

540

284

718

453

126

152

2 273

Net sales at constant metal prices and 2007 exchange rates

540

284

711

419

120

149

2 223

Operating margin

12

12

34

32

6

12

108

 

Net sales at current metal prices by geographical market


in millions of euros

France

Germany

Other Europe

North America

Asia-
Pacific

Rest of the world

Total Group

June 30, 2007

529

371

1178

753

494

467

3 792

June 30, 2006

486

394

1212

939

234

421

3 686

Related Document

Your Contact

Michel Gédéon Financial Communication
Phone +33 1 78 15 05 41
michel.gedeon@nexans.com
Jean-Marc Bouleau Financial Communication
Phone + 33 (0)1 73 23 84 61
jean_marc.bouleau@nexans.com
Jean-Claude Nicolas Corporate Communication
Phone +33 (0) 1 73 23 84 51
jean-claude.nicolas@nexans.com
Pascale Strubel Corporate Communication Department
Phone + 33 (0)1 73 23 85 28
pascale.strubel@nexans.com
Angéline Afanoukoe Press relations
Phone +33 1 78 15 04 67
Angeline.afanoukoe@nexans.com

About Nexans

With energy as the basis of its development, Nexans, the worldwide leader in the cable industry, offers an extensive range of cables and cabling systems. The Group is a global player in the infrastructure, industry and building markets. Nexans addresses a series of market segments from energy, transport and telecom networks to shipbuilding, oil and gas, nuclear, automotive, electronics, aeronautics, handling and automation. With an industrial presence in more than 30 countries and commercial activities worldwide, Nexans employs 21,000 people and had sales in 2006 of 7.5 billion euros. Nexans is listed on the Paris stock exchange, compartment A of the Eurolist of Euronext. More information on www.nexans.com